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Hatch Seeks to Separate Tax Changes, Debt Reduction Efforts

Republican Senator Orrin Hatch of Utah called for an overhaul of the U.S. tax code that wouldn’t generate additional revenue for the government.

“We must reduce deficits and debt through spending reductions,” he said in a speech today in Washington to the American Action Forum, a group whose website says it supports smaller government. “Separately, we must promote tax reform. If we try to mix the two, we risk walking down the road to a back- door tax increase.”

Hatch, the top Republican on the Senate Finance Committee, said Congress should base any tax changes on the assumption that the 2001 and 2003 income-tax cuts will be extended indefinitely instead of expiring as scheduled at the end of 2012.

The Senate’s 47-seat Republican minority, which has the ability to block most legislation in the 100-member chamber, will have significant input in shaping any tax bill that moves through Congress. Senate Republicans eyeing potential gains in the 2012 elections also have an incentive to wait until the next Congress, when they might have a majority capable of pushing through spending and tax reductions.

The two parties’ differences over taxes are “not intractable,” Hatch told reporters after the speech, although he also said, “It’s going to take a few years to do it if we can do it at all.”

Obama, Baucus

President Barack Obama and Senate Finance Chairman Max Baucus, a Montana Democrat, have said they want to pursue tax code changes, as has the House’s top tax writer, Michigan Republican David Camp. Obama has said he wants a revenue-neutral overhaul of the corporate tax code.

Hatch, who faces re-election in 2012, said disputes over what is fair in overhauling the system may be the most “politically charged” obstacle to an agreement between Republicans and Democrats.

“I honestly don’t know if there is a limit to how much income they feel should be distributed from higher-income taxpayers to lower-income taxpayers,” he said. “Maybe there isn’t a limit.”

Almost half of Americans don’t pay income taxes, he said. Many of those people still pay taxes to fund Social Security and other programs.

“Does it make any sense to have millions and millions of Americans desiring more government spending without the corresponding discipline that comes with the obligation to pay for this spending through income taxes?” he said.

Hatch also told reporters he believes a temporary holiday allowing companies to repatriate offshore profits at a reduced tax rate is probably “not a good way to go.” Companies such as Cisco Systems Inc. have been calling for such a policy.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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